China is preparing to levy an unprecedented fine of up to 1 billion yuan (approximately HK$1.08 billion) on PricewaterhouseCoopers (PwC) and will suspend some of its operations within the country.
This move comes in connection with PwC’s involvement in a significant financial fraud case in China. Sources familiar with the situation revealed that the Ministry of Finance is expected to announce these penalties due to PwC’s auditing work for China Evergrande Group (Evergrande).
The anticipated fine of at least 1 billion yuan will set a new record, surpassing the previous highest fine of 212 million yuan imposed on Deloitte Touche Tohmatsu in 2023. In addition to the financial penalty, the sanctions could include suspending activities at several PwC offices across mainland China.
PwC has been under intense scrutiny following a substantial financial fraud investigation linked to Evergrande. Earlier this year, authorities fined Evergrande 4.18 billion yuan and disclosed that its main unit, Hengda, had inflated its revenue by 564 billion yuan for the years 2019 and 2020.
In recent months, PwC has lost several Chinese clients, adding to over a dozen firms it has ceased auditing in the past two years. These include major entities such as China Taiping Insurance Holdings, China Merchants Bank, and the People’s Insurance Company (Group) of China.
In April, PwC denied allegations made in an anonymous letter circulated on social media, accusing the firm and its partners of misconduct in their audit of Evergrande. The company labeled the letter as containing “inaccurate statements” that could damage its reputation and legal standing. PwC Hong Kong reported the matter to relevant authorities.
The anonymous letter questioned PwC’s role in potential accounting discrepancies at Evergrande and other corporate governance issues, although Bloomberg reported that it could not verify the authenticity of the letter.